AUSTRALIA IS NOT AN ECONOMIC ISLAND

CIO MONTHLY | MARCH 2017

Many people think that Australia is an island, not only in the geographic sense, but also with respect to economics and financial markets. On both fronts they are mistaken.


As described in the Encyclopaedia Britannica, an island is a mass of land that is both “entirely surrounded by water” and “smaller than a continent.” Therefore, Australia can’t be an island as it is commonly referred to, as it is already a continent. Similarly, we are not an economic island operating independently of global trends. This is despite us enjoying economic expansion for 25 years straight, and avoiding global events such as the Asian financial crisis, the global recession in the 1990s following the dot-com bubble, and the great recession following the sub-prime crisis in 2008.

This year has been a great example of how we follow the lead from offshore markets. Our domestic financial markets have been almost entirely driven by offshore events—particularly those in the US. This is why, at Crestone, we spend so much time and effort analysing global economics, politics and risks.

In this month’s update, we consider some of the major global risks, why we are not immune to them, and how they might impact the domestic economy and markets going forward.